Chancellor expected to U-turn on scrapping 45p tax rate

The Chancellor’s mini-budget triggered turmoil in the City and was criticised by the International Monetary Fund.

03 October 2022

Chancellor Kwasi Kwarteng is expected to make an abrupt U-turn over the abolition of the top rate of income tax for the highest earners.

Mr Kwarteng had been planning to insist at the Conservative conference in Birmingham that his party “stay the course” and back his plan for tax cuts but a statement is now expected on Monday morning ahead of his appearance on the broadcast round.

The Sun newspaper had earlier reported that Prime Minister Liz Truss was preparing to ditch the plans after talks with Mr Kwarteng.

The Chancellor’s mini-budget triggered turmoil in the City, was criticised by the International Monetary Fund and resulted in a £65 billion emergency intervention by the Bank of England to restore order.

Former cabinet ministers Michael Gove and Grant Shapps took aim at the plan to cut income tax for people earning more than £150,000 at a time when millions of people are seeing their family finances squeezed.

Asked about the potential U-turn on BBC Radio 4’s Today programme, Alasdair Locke, chairman of the Motor Fuel Group and a Conservative Party donor, said: “I think it would be unfortunate to be blown off course by a sort of rather sensational media.

“The presentation was very poor, it’s the right direction of travel however, and generally cutting taxes when you’re facing an economic downturn if not a recession seems to me to be a pretty obvious thing to do rather than to raise taxes. The 40% to 45% rate is a bit of a distraction. It doesn’t raise much money.”

He said such a change would be “very minor” when compared with the overall package planned by the Government.

And he said the direction of travel of making an environment that is “good for business” is “entirely correct”.

But he warned: “I think we should be, as a party and as a Government, we should be careful about having what we do dictated by short-termism, by media reaction, by market reaction, which is not necessarily rational.”

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